Tuesday, August 31, 2010

Reading the Safaricom Tea Leaves

Post two of three: Safaricom has been one of the most progressive companies in terms of investor relation’s management, largely because of the cost of their large shareholder base. They spearheaded move to avail electronic instead of printed annual reports and payment of dividend by m-pesa, as opposed to cheques which were unviable for many shareholder who had the bare minimum of shares. Another benefit of electronic reports is that they are easier for potential investors to obtain (some companies print as few reports as legally possible and they don’t circulate widely)

Inside Safaricom's 2010 A/R

Shareholders: - Safaricom has 787,363 shareholders down from 828,912 in 2009
- The Government of Kenya has acquired more shares in the company despite a stated move of divestment. This year they have 22 million more shares, going up from 35% to a 35.06% stake
- Overall there are more foreign buyers of Safaricom shares, but NSSF Rwanda may have exited
- Director Esther Koimett bought 517,600 shares, and chairman Nicholas Nganga has 850,100. Outgoing CEO Michael Joseph and Finance Manager Les Baille each own 2.5 million shares, while their replacements, Bob Collymore and Chris Tiffin have none
- Last years’ AGM (the first since NSE listing and prominently advertised as having no handouts or frills) was attended by just 2,182 shareholders.
- 180,000 shareholders got their 2009 dividend by m-pesa (mobile phone payment)

Performance - Revenue breakdown of the 83 billion ($1 billion) in revenue voice accounted for 75% (2009: 83.4%), with SMS and other data at 9.7% (2009: 8.8%), Mpesa at 9.0% (2009: 4.2%) and equipment sales at 4.4% (2009: 3.3%). Revenue growth was 8% for voice, 32% for SMS/Data and 158% for Mpesa n all categories was positive with voice at 7.8%, SMS and other data at 32.4%, 58% for equipment sales and 158% for Mpesa
- North Eastern Kenya region is growing by over 200% owing to improved security

Other Numbers - Earned Kshs 7.6 billion ($95 million) from m-pesa (up from 2.9 billion in 2009)
- Has Kshs 10 billion ($125 million) in cash and short-term deposits, up from 4 billion the year before. Safaricom earned interest income of Kshs 350 million in the year
- Borrowings comprise 6.28 billion from a consortium of banks, 2.3 billion from one bank, and 7.5 billion in corporate bonds
- Have 2,000 dealers and 200,000 retailers
- Pay income tax at 27%, compared to 30% before they listed at the NSE

Staff - Launch ESOP in 2009 with 101 million shares and which will be issued in 2013. 2165 staff (88% of total) have joined the scheme
- Key management were paid 522 million (up from 438m)
- Of their 2,470 staff the company has an almost equal ratio of male and female employees

Fibre/Data Investments: - are investing 890 million into Seacom: they paid 316 million and balance of 573 million is to be paid over the next 5 years
- Paid 2 million to TEAMS for a 22.5% stake (other shareholders are GoK and Telkom both with 20%)
- Paid KPLC Kshs 116 million as part of 290 million for use their power network for fibre distribution over the next 20 years
- Bought packet stream data networks, for wimax,for Kshs 373 million shillings, and has lent Kshs 600 million to One communication (in which they own 51%)

Customers - their internal customer delight index had a measure of 7.38 last year against a target of 7.76
- Its true that premium customers get better customer service - there is a platinum line at call centre to service platinum (high end) customers on a prioritized basis (i.e. even by calling regular customer service free help line, ‘100’ they get through and served faster
- Safaricom business has over 2,000 customers including airlines, media houses, banks
- Mobile data is responsible for 90% of data revenue
- customer growth (their measure) Safaricom took up 65% of new phone lines in last year
- website: Safaricom the most progressive companies in online investor relations in terms of results and investor briefing posted on the web site and now dividend payments by mobile phone. It now uses twitter & facebook accounts, to promote its services and also try and (slowly) responsd to numerous customer service and product queries posted online

Rival disclosures: Safaricom’s main rival is Zain Kenya - and while it is not a listed company, the former Zain parent was listed on the Kuwait Exchange, and used to produce some extensive reports on their African operations - ranking individual countries by revenue, profit, subscribers - which was information that the local Zain office did not typically share. Similar information can also be gleaned from Orange of France about their Telkom Kenya operation.

Zain Africa sold to Bharti Airtel of India and while a financial quarter is yet to pass since the takeover, it appears they may follow the trend, as they are also a listed company with segmented reporting requirements. For Kenya in July 2010, they note that:

- Airtel Kenya has been given additional frequencies that enable it to offer 3G services
- All operators will have the right to borrow funds from the universal service fund (a fund that will comprise 1% of mobile operators annual turnover) and to use to set up infrastructure in the identified rural areas.
- Kenya companies are Bharti Airtel Kenya B.V. (name changed from Celtel Kenya BV), and Bharti Airtel Kenya Holdings B.V. (name changed from Celtel Kenya Holdings BV)

The Author of my Tomorrow - a love poem
-
The author of my tomorrow
Is a man who knows tomorrow’s news
He’s smart, slick and quick with his tongue
His books tell of a curious mind and he likes his fu...